The Week In Securities Litigation: SEC Announces Modified Settlement Policy For Select Enforcement Actions

Commission Chair Mary Jo White announced a modified settlement policy for select enforcement actions. While most cases will be settled on a neither admit nor deny basis, the category of actions in which admissions will be required will be expanded. Currently only those actions where the defendant made admissions in a parallel case - typically a criminal action - fall within this group. Now the group will be expanded to include those which are egregious and have wide spread public interest.

The Commission settled its action against eight mutual fund directors, dropping two of the three charges initially alleged in the Order. The SEC also brought another financial fraud action against a PRC based issuer that is the product of a reverse merger, a manipulation case and an investment fund fraud action this week. All three cases are in litigation.


Settlement policy: SEC Chair Mary Jo White stated that the agency is going to change the way it settles enforcement actions, modifying its frequently criticized "neither admit nor deny" policy. Now, in select cases, the Commission will require that admissions be made as a condition of settling rather than permitting the defendant to "neither admit nor deny" the allegations in the complaint of its enforcement action. While the precise parameters were not defined by Ms. White, she did indicate that it would apply to cases where there is intentional, egregious conduct and/or wide spread public interest. The precise parameters of the new policy were not specified. It will be applied on a case by case basis. For most settling cases the current policy will continue to apply.

Remarks: Gregg E. Berman, Associate Director, Office of Analytics and Research Division of Trading and Markets, at the SIFMA Tech Conference, New York City (June 18, 2013). His remarks focused on a new MIDAS system which permits the Commission to monitor the markets in real time, conduct forensic analysis, and do market structure research for policy decisions (here).

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For more commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.

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